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4 CHOICES Third Quarrer 1999
by Jason F.
Shogren and
John
Tschirhart 1 n 1973, the United States Congress passed the
Endangered Species Act (ES~) to shelter threat­ened
and endangered species from the pres­sures
of human activity on private and public land.
The Act acknowledges that species have "ecologi­cal
educational, historical, recreational and sci en-tifi,
c value" unaccounted for in the course 0 f" eco-nomic
growrh and development" (ESA, Sec. 2). At
the time, this language seemed harmless enough,
and the,Act passed with little or no opposition-
390-12 in the House and 92-0 in the Senate.
• Bur to say the ESA has proven to be controver-sial
might be the environmental understatement of
the decade. First, the Act significantly broadened
the scope of species protection. It makes every spe­cies,
subspecies, and discrete populations (restricte~ .
,it
to vertebrates) of plants and animals eligible for
protection by being listed either as endangered or
threatened (those likely to become endangered). Not
surprisingly, the list of endangered and threatened
species expanded from 114 in 1973 to nearly 1,200
in 1999. Plants make up two-thirds, of the listed
species. Second, the original language of the Act
implies that all species will be protected regardless
of COSts. The ESA thus reversed the previously held
doctrine that species protection would be "practi­cable
and consistent with primary purposes" of land
use. The Supreme Court upheld this new view in
Tennessee Valley Authority v. Hill, stating that " . .. it
is clear from the ESA's legislative history that Con­gress
intended to halt and reverse the trend toward
species extinction-whatever t he cost. "
Broader scope and unfunded mandates fan the
flame of controversy because the ESA epitomizes
the classic quandary of diffuse benefits and concen­trated
costs. T he benefits of protecting endangered
species accrue to th e entire nation, while a sizab le
share of COS ts fallon private landowners. About
half of the listed endangered species rely on priv~te
land for 80 percent of their habitat. Some land­owners
complain about the high COSts of comply­ing
with the ESA and demand compensation for
compliance. Some defenders of the ESA agree­they
see compensation as the way to bring private
land into the fold of species protection. But other
landowners want nothing to do with compensa­tion,
for they fear further public erosion of private
co ntrol ; and many pro-ESAers view compensation
as a plot to paralyze the Act through the backdoor
of underfunding. This tangled web of compensa­tion
has stalled the reauthorization of ESA since
1992. Congress has proposed several bills; none
has passed.
No one sees a quick end to the ESA contro­versy.
At the end of the day, society is left with
difficult economic choices-choices that affect and
are affected by biological needs and political reali­ties.
Working through this tangle requires more
expli cit attention to how economic in centives af­fect
all sides of the debate.
Biological needs, political realities
Today, the ESA lists over 1,200 species as endan­gered
or threatened in the United States (table 1).
By 1997, the data show that the U.S. Fish and
Wildlife Service designated eight U.S. species of
animals and plants as "recovered" and removed
seven spec ies from the list because they were desig­nated
"extinct." Recovery plans guide the conser­vation
efforts for 886 species, including 519 ESA­approved
plans. Some plans address conservation
for multiple species. A 1994 Government Account­ing
Office report to Congress listed the status of
threatened and endangered specie as fo llows: 42
percent stable or improving, 34 percent declining,
1.0 percent extinct, and 23 percent unknown. Spe­cies
down listed from endangered to threatened in­clude
the Aleutian Canada goose, the greenback
cutthroat tro ut, the Virginia round-leaf birch, and
the bald eagle.
Uncertain cause-and-effect and ti me-scale dif­ferences
make an assessment of the ESA difficult.
Species stabili ty or improvement may not be solely
attributed to the ESA-orher factors such as in­creased
per capita wealth may have aided improve­ments.
In addition,' shifts in species distributions,
abundance, and extinction can take centuries. Many
of the species currently protected by ESA have
gradually retracted from historic geographic bound-
CHor E Third Quaner 1999 5
Table 1. Box Score of Threatened and Endangered Species (as of 31 March 1999)
Group Endangered Threatened Total Species
U.S. Foreign U.S. Foreign Species with Plans
Mammals 60 251 8 16 335 49
Birds 75 178 15 6 274 77
Reptiles 14 65 21 14 114 30
Amphibians 9 8 7 1 25 11
Fishes 70 11 40 0 121 88
Snails 18 1 10 0 29 20
Clams 61 2 8 0 71 45
Crustaceans 17 0 3 0 20 12
Insects 28 4 9 0 41 27
Arachnids 5 0 0 0 5 5
Animal subtotal 357 520 121 37 1,035 364
Flowering plants 540 1 132 0 673 494
Conifers 2 0 1 2 5 2
Ferns & others 26 0 2 0 28 26
Plant subtotal 568 135 2 706 522
Grand total 925 521 256 39 1,741 886"
Source: u.s. Fish and Wildlife Service. Division of Endangered Species, 1999.
• There are 519 approved recovery plans; some plans cover more than one species, and some species have more than one plan.
aries and declined in abundance over the past five
hundred years. Natural or "background" extinction
rates, established from the fossil record over thou­sands
of years, further cloud the cause of species de­cline.
Thus, rwenty-flve years is a short time to judge
the effectiveness of a law that begins working only
after species face imminent danger of extinction.
Scientific uncertainty opens the door to the po­litical
realities underlying the ESA. The reso urces
that society devotes to habitat protection and other
biological needs exact an opportunity COSt: these
resources could be used to satisfy other human de­mands.
And because governments at all levels help
allocate these resources, interest groups inevitably
fight for or agains t devoting resources to the ESA
or compete for the resources by lobbying legisla­tures,
flling law suits, and conducting illegal activi­ties.
In addition, local, state, and federal agencies
are pitted agai nst one another over jurisdiction and
resource ava ilability.
6 CHOICES Third Quarrer 1999
Table 2. Total Expenditures on Endangered Species, Federal and State
Governments, 1989-93
Taxonomic Group Federal All States Total
(in 1000s) (in 1000s) (in 1000s)
Mammals $742,828.7 $66,260.5 $809,089.2
Birds 268,388.6 120,233.4 388,622.0
Reptiles 50,794.2 18,139.5 68,933.7
Amphibians 1,257.4 141.8 1,399.2
Fish 222,744.1 5,195.1 227,939.2
Snails 1,322.4 86.1 1,408.5
Mussels 7,533.3 1,145.4 8,678.7
Crustaceans 627.6 78.5 706.1
Insects 11 ,365.6 2,939.6 14,305.2
Arachnids 3,035.7 21.3 3,057.0
Plants 18,014.6 4,142.4 22,157.0
All Groups $1 ,327,912.2 $218,383.6 $1 ,546,296.0
Source: Cash, D., et al. "The Database on the Economics and Management of Endangered Species (DEMES)," Endangered
Species Protecfion In the United States: Biological Needs. Political Realifies. Economic Choices. J. Shogren and J. Tschirhart,
eds. New York: Cambridge University Press, forthcoming 1999.
Three highly publicized examples of interest
group and government conflicts revolve around ef­forts
to protect the northern spotted owl and vari­ous
species of salmon in the Pacific Northwest,
and to reintroduce the timber wolf to Yellowstone
Park. Conflicts such as these cause costly litigation
among business, environmental, and government
groups, including litigation between government
agencies. Some groups see their ability to protect
their investments or their privacy threatened by too
many ESA mandates, while others envision their
natural heritage jeopardized by too few mandates.
Regardless, both groups see the Act as going be­yond
species protection in that the ESA has proven
to be a powerful tool to control land use.
Many landowners affected by the Act fear ced­ing
control of their resources and privacy to state
and federal governments. Although the federal gov­ernment
devotes only a small portion of its budget
to the ESA, the dollars it does spend can over­whelm
local communities set against ESA policies
or stimulate local communities favoring ESA poli­cies.
Table 2 shows spending by federal and state
agencies on endangered species broken down by
taxonomic groups. Because the ESA specifies that
listing is legally required to be based on science,
funds would hopefully be allocated according to
the biological needs of preservation. But evidence
suggests that funding frequently follows interest
group politics and "pork" spending (see, for ex­ample,
Ando).
Economic choices
In the end, questions of listing and habitat protec­tion
come down to tile fundamentals of decision
making-accurately assessing the risks of extinc­tion,
weighing benefits against opportlU1ity costs,
and understanding impediments and incentives for '
voluntary species protection. The need to under­stand
these flU1damental issues has pushed econom­ics,
welcome or not, into the middle of the reau­thorization
debate. Why economic behavior needs
to be better integrated into the ESA still puzzles
many noneconomists who equate economics wiili
financial and commercial concerns. This is unfor­tunate
in iliat we need to stress iliat economics and
conservation biology have ilie same underlying guid­ing
principle-choice under scarcity. And iliat by
better accounting for ilie basics of economic be­havior
in ESA policy formation we can hopefully
reverse the trend that has often led to ineffective
and, in some instances, counterproductive conser­vation
policy. For example, a few days before the
Fish and Wildlife Service listed the golden-cheeked
warbler, a firm owned by Ross Perot hired workers
to destroy hundreds of acres of oak and juniper­habitat
to ilie warbler (Mann and Plummer). Point­ing
out iliat we can save more species wiili fewer
resources once economics is addressed may seem
obvious to economists, but to many people it is
not so clear.
Economic behavior matters to species protec­tion
for at least iliree reasons (Shogren et al.). First,
economic behavior matters because economic cir­cumstances
(for example, relative prices, per capita
wealili) influence the risks faced by a species and
ilius whether a species should be listed as endan­gered.
Most people agree with one side of iliis ar­gument.
The common perception is that people's
quest for development and commercial profits de­stroys
habitat and endangers species-full stop, end
of discussion. But iliis sentiment gives only half of
the stoty. On ilie oilier side, people like nature, a
preference that leads to ilie private creation or pro­tection
of habitat. Relative land prices and wealth
influence private landowners' ability to set aside land
for habitat protection. Risk assessment that does not
account for private citizen and community response
to wealili or relative land prices, as it affects habitat
preservation decisions, will underestinlate risk in some
regions and overestimate risk in oiliers.
This fairly contentious point says that econom­ics
has a bigger role to play than just helping find
cost-effective solutions. We are saying that the bio­logical
sciences cannot ignore economic parameters
in their models of risk-a point not obvious or
acceptable to many people. But it is correct if ~ou
believe that economic and ecological systems are
jointly determined. We are pointing out a problem
of omitted variable bias that exists in the prevailing
risk assessment-risk management bifurcation un­derlying
ESA policy. One can jusrly characterize
the current ESA mindset as following three linear
steps: (1) financial and commercial quests put a
species at risk; (2) biology determines whether a
species should be listed as endangered; and (3) eco­nomics
then can be used to find cost-effective rem­edies
to reverse this trend. We question step 2-
listing decisions based only on biology. The preci­sion
of species risk assessment can thus be increased
by using both biological and economic parameters
as determinates of endangerment. Whether the ex­tra
precision is worth the cost of more information
is an empirical question.
Second, economic behavior matters because scar­city
is a reality. Society may place greater value on
other goods and services created from scarce re­sources
than on the last species these resources might
preserve. Choices between species protection and
other programs must be made. Making good choices
requires that we estimate the benefits and costs of
proposed programs. Even very intangible, difficult­to-
measure values, such as moral imperatives to pro­tect
earth's inhabitants, must be recognized. Policy
makers and regulators already implicirly weigh ben­efits
and costs. Explicirly incorporating more formal
methods to help discriminate between and among
species and other programs will provide greater open­ness
and -u"ansparency in how we choose to rank
listing decisions and implement recovety plans.
What costs and benefits, for instance, arise from
saving the endangered Dehli Sands flower-loving
fly in California? The costs have included $4 mil­lion
to relocate the site of a new hospital in San
Bernardino County. Many people probably would
echo the words of Colton, California, city attorney
Julia Biggs: "I consider myself an environmentalist,
but this is offensive to me. This is not some sylvan
glen .... This is not a lion, tiger or bear. Or even an
owl. This is a fly ." The contrary voice says that the
original hospital site provides critical habitat more
scarce and irreplaceable than other potential areas
of hospital construction. Dragging these disparate
perceptions of costs and benefits into an explicit
benefit-cost framework can shed light on the pros
and cons of alternative options.
If benefits cannot be easily or reasonably esti­mated,
government policy should find the least-
CHOICES Third Quarrer 1999 7
expensive path to a desired target. Three examples
underscore how cost-effective policies can improve
resource allocation. First, policies which recognize
the heterogeneity of land values rather than using
standard homogenous valuations can substantially
cut the cOStS of species protection. A second ex­ample
focuses on diminishing returns. The north­ern
spotted owl can be saved relatively inexpen­sively
with a reasonably high probability. But re­searchers
estimate the cost to improve the odds of
survival to 92 from 91 percent at $3.8 billion (Mont­gomery,
Brown, and Darius). Is the exu'a percentage
worth it? A third example of least-cost programs
follows the old adage that "an OWlce of prevention is
worth a pound of cure." Prevention strategies such
as landscape conservation, the establishment of parks
and reserves, and the enaCU11ent of habitat may prove
more cost-effective than species recovery programs
that protect only one species.
The mird reason why economics matters for en­dangered
species protection is because economic
incentives guide hwnan behavior. Endangered spe­cies
inhabiting private land can be protected if eco­nomic
incentives encourage landowners to preserve
their prope,rty. Currenrly, the ESA provides some
regulatory incentive for landowners to cooperate
with species conservation policy through Habitat
Conservation Plans-plans that allow a landowner
8 CHOICES Third Quarrer 1999
to alter habitat under certain management restric­tions.
But current financial incentives may prod
landowners to prevent government biologists from
looking for listed species on private pro perry, or
to destroy habitat for listed species, or to "take"
listed and potentially listed species. T hese ac­tions
may result in direct harm to listed species
and destruction or reduction in the value of habi­tat,
and they may increase the costs of designat­ing
habitat and species recovery. Agencies or pri­vate
parties can attempt to prevent such actions
by providing incentives for landowners to coop­erate
through compensation for "takings," rather
than creating disincentives through permits or
crimi nal penalties.
Imperfect information confounds the design
of preservation policy. On private land, the gov­ernment
needs landowner cooperation to gain
the information necessary to administer conser­vation
policy. Some landowners can escape regu­lation
altogether by withholding biological in­formation
from government officials. If this is
the case, effective conservation policy may need
to buy information rather than sell fear with per­mits
and fines. But here is the rub . T he agency
should lower the payment to lessen the incentive
for some landowners to take advantage of their
private information, but smaller subsidies result
in fewer acres set aside fo r habitat. On net, the
realized habitat will be less than desired, or the
desired habitat will be more expensive than jus­tified.
Research on the economics of imperfect
information suggests that a combination of
mechanisms might be needed to help society
reach a better level of species protection. Com­pensation,
government or conservation group
purchases of land or development rights, insur­ance
programs, tax breaks, and tradable rights in
habitat conservation might all be needed.
Charting a future course
Twenry-five years ago Congress established the
ESA to address the risk of species extinctio n. And
while a quarter century is a short time to judge
the overall effectiveness of the Act, enough data
and knowledge exist now to suggest how econom- .
ics can help improve the ESA in both listing deci­sions
and recovery plan development. First, the
decision to list a species as endangered can be
improved by accounting for economic circum­stances
in species risk assessment. Human actions
and reactions help determine risk and its conse­quences;
omitting these factors from risk assess­ment
can bias estimates of risk. Second, the ben­efits
and costs of protection should frame the ESA
policy debate. Realiry dictates that the net ben­efits
of preservation be weighed against the net
benefits of other important societal objectives.
Third, the ESA will be more effective by creating
the economic incentives to implement the desired
level of species preservation in a least-cost man­ner.
Economic incentive schemes can and have
worked. Making these schemes more cost-effec­tive
will require additional information on eco­nomic
opportuniry costs and biological effective­ness.
But we also recognize that sometimes com­pensation
is not enough-landowners want their
privacy respected, their prior stewardship efforts
acknowledged, and their abiliry to protect their
investment unrestricted.
This suggests that we should explore the option
in which landowners are provided the opportuniry
to sell private shares of critical habitat rights on the
open market without opening themselves up to pub­lic
access. Similar to the real estate market, private­sector
bioeconomic appraisers would assess the bio­logical
quali ry of the critical habitat rights offered
for sale. Sellers would then post their offer to sell a
given habitat right for a given price, subject to pri­vate
appraisal. Information not essential to the trans­action
would remain confidential. Such a market
could complement already existing programs that
use a bilateral negotiation landowner-by-landowner
approach.
As we begin the next millenium, some scientists
argue that our biological systems could undergo
profound and rapid changes resulting in extinction
of many species. Better let it be said that we were
.. not adrift in a sea of interest groups and political
infighting, but rather that we used the best biologi­cal
and economic lrnowledge we had to chart our
course. rt.I
• For more information
Ando, A "Implications ofInterest-Group Behavior for
the ESA" Endangered Species Protection in the United
States: Biological Needs, Political Realities, Economics
Choices. J. Shogren and J. Tschirhart, eds. New York:
Cambridge University Press, forthcoming 2000.
Bean, M. "Endangered Species? Endangered Act?" En­vironment
41 (1999): 12-38.
Brown, G., and J. Shogren. "Economics of the Endan­gered
Species Act."]. Econ. Perspect. 12(1998):3-20.
Eisner, T., J. Lubchenco, E. Wilson, D. Wilcove, and
M. Bean. "Building a Scientifically Sound Policy for
Protecting Endangered Species." Science
268(1995): 1231-32.
Goldstein, J. "Whose Land Is It Anyway?" Choices,
Second Quarter 1996, pp. 4-8.
Innes, R., S. Polasky, and J. Tschirhart. "Takings,
Compensation and Endangered Species Protection on
Private Lands." ]. Econ. Perspect. 12(1998):35-52.
Mann, c., and M. Plummer. Noah's Choice. New York:
Alfred Knopf, 1995.
Metrick, A, and M. Weitzman. "Patterns of Behavior
in Endangered Species Preservation." Land Econ.
72(1996):1- 16.
Montgomery, c., G. Brown, and M. Darius. "The
Marginal Cost of Species Preservation: The Northern
Spotted Owl. " ]. Environ. Econ. and Manage.
26(1994): 111-28.
National Research Council (NRC). Science and the
EndangeredSpeciesAct. Washington DC: NationaiAcad­emy
Press, 1995.
Polasky, S., and H. Doremus. "When the Truth Hurts:
CHOICES Third Quarter 1999 9
Endangered Species Policy on Private Land with Imper­fect
Information.» ]. Environ. Econ. and Manage.
35(1998):22-47.
Shogren, J ., ed. Private Property and the Endangered
Species Act: Saving Habitat, Protecting Homes. Austin
TX: University of Texas Press, 1998.
Shogren, J.F., J. Tschirhart, T. Anderson, AW. Ando,
S.R. Beissinger, D. Brookshire, G.M. Brown, Jr., D.
Coursey, R. Innes, S.M. Meyer, and S. Polasky. "Why
Economics Matters for Endangered Species Protec­tion."
Conservation Biology, in press.
U.S. Fish and Wildlife Service. Report to Congress:
Endangered and Threatened Species Recovery Program.
U.S. Government printing office, Washington DC,
1994.
Jason Shogren
is the Stroock
Distinguished
Professor of
Natural
Resource
Conservation
and Manage­mentand
professor of
economics, and
John Tschirhart
is professor of
economics and
director of the
Public Utility
Research and
Training
Institute, both at
the University of
Wyoming.

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4 CHOICES Third Quarrer 1999
by Jason F.
Shogren and
John
Tschirhart 1 n 1973, the United States Congress passed the
Endangered Species Act (ES~) to shelter threat­ened
and endangered species from the pres­sures
of human activity on private and public land.
The Act acknowledges that species have "ecologi­cal
educational, historical, recreational and sci en-tifi,
c value" unaccounted for in the course 0 f" eco-nomic
growrh and development" (ESA, Sec. 2). At
the time, this language seemed harmless enough,
and the,Act passed with little or no opposition-
390-12 in the House and 92-0 in the Senate.
• Bur to say the ESA has proven to be controver-sial
might be the environmental understatement of
the decade. First, the Act significantly broadened
the scope of species protection. It makes every spe­cies,
subspecies, and discrete populations (restricte~ .
,it
to vertebrates) of plants and animals eligible for
protection by being listed either as endangered or
threatened (those likely to become endangered). Not
surprisingly, the list of endangered and threatened
species expanded from 114 in 1973 to nearly 1,200
in 1999. Plants make up two-thirds, of the listed
species. Second, the original language of the Act
implies that all species will be protected regardless
of COSts. The ESA thus reversed the previously held
doctrine that species protection would be "practi­cable
and consistent with primary purposes" of land
use. The Supreme Court upheld this new view in
Tennessee Valley Authority v. Hill, stating that " . .. it
is clear from the ESA's legislative history that Con­gress
intended to halt and reverse the trend toward
species extinction-whatever t he cost. "
Broader scope and unfunded mandates fan the
flame of controversy because the ESA epitomizes
the classic quandary of diffuse benefits and concen­trated
costs. T he benefits of protecting endangered
species accrue to th e entire nation, while a sizab le
share of COS ts fallon private landowners. About
half of the listed endangered species rely on priv~te
land for 80 percent of their habitat. Some land­owners
complain about the high COSts of comply­ing
with the ESA and demand compensation for
compliance. Some defenders of the ESA agree­they
see compensation as the way to bring private
land into the fold of species protection. But other
landowners want nothing to do with compensa­tion,
for they fear further public erosion of private
co ntrol ; and many pro-ESAers view compensation
as a plot to paralyze the Act through the backdoor
of underfunding. This tangled web of compensa­tion
has stalled the reauthorization of ESA since
1992. Congress has proposed several bills; none
has passed.
No one sees a quick end to the ESA contro­versy.
At the end of the day, society is left with
difficult economic choices-choices that affect and
are affected by biological needs and political reali­ties.
Working through this tangle requires more
expli cit attention to how economic in centives af­fect
all sides of the debate.
Biological needs, political realities
Today, the ESA lists over 1,200 species as endan­gered
or threatened in the United States (table 1).
By 1997, the data show that the U.S. Fish and
Wildlife Service designated eight U.S. species of
animals and plants as "recovered" and removed
seven spec ies from the list because they were desig­nated
"extinct." Recovery plans guide the conser­vation
efforts for 886 species, including 519 ESA­approved
plans. Some plans address conservation
for multiple species. A 1994 Government Account­ing
Office report to Congress listed the status of
threatened and endangered specie as fo llows: 42
percent stable or improving, 34 percent declining,
1.0 percent extinct, and 23 percent unknown. Spe­cies
down listed from endangered to threatened in­clude
the Aleutian Canada goose, the greenback
cutthroat tro ut, the Virginia round-leaf birch, and
the bald eagle.
Uncertain cause-and-effect and ti me-scale dif­ferences
make an assessment of the ESA difficult.
Species stabili ty or improvement may not be solely
attributed to the ESA-orher factors such as in­creased
per capita wealth may have aided improve­ments.
In addition,' shifts in species distributions,
abundance, and extinction can take centuries. Many
of the species currently protected by ESA have
gradually retracted from historic geographic bound-
CHor E Third Quaner 1999 5
Table 1. Box Score of Threatened and Endangered Species (as of 31 March 1999)
Group Endangered Threatened Total Species
U.S. Foreign U.S. Foreign Species with Plans
Mammals 60 251 8 16 335 49
Birds 75 178 15 6 274 77
Reptiles 14 65 21 14 114 30
Amphibians 9 8 7 1 25 11
Fishes 70 11 40 0 121 88
Snails 18 1 10 0 29 20
Clams 61 2 8 0 71 45
Crustaceans 17 0 3 0 20 12
Insects 28 4 9 0 41 27
Arachnids 5 0 0 0 5 5
Animal subtotal 357 520 121 37 1,035 364
Flowering plants 540 1 132 0 673 494
Conifers 2 0 1 2 5 2
Ferns & others 26 0 2 0 28 26
Plant subtotal 568 135 2 706 522
Grand total 925 521 256 39 1,741 886"
Source: u.s. Fish and Wildlife Service. Division of Endangered Species, 1999.
• There are 519 approved recovery plans; some plans cover more than one species, and some species have more than one plan.
aries and declined in abundance over the past five
hundred years. Natural or "background" extinction
rates, established from the fossil record over thou­sands
of years, further cloud the cause of species de­cline.
Thus, rwenty-flve years is a short time to judge
the effectiveness of a law that begins working only
after species face imminent danger of extinction.
Scientific uncertainty opens the door to the po­litical
realities underlying the ESA. The reso urces
that society devotes to habitat protection and other
biological needs exact an opportunity COSt: these
resources could be used to satisfy other human de­mands.
And because governments at all levels help
allocate these resources, interest groups inevitably
fight for or agains t devoting resources to the ESA
or compete for the resources by lobbying legisla­tures,
flling law suits, and conducting illegal activi­ties.
In addition, local, state, and federal agencies
are pitted agai nst one another over jurisdiction and
resource ava ilability.
6 CHOICES Third Quarrer 1999
Table 2. Total Expenditures on Endangered Species, Federal and State
Governments, 1989-93
Taxonomic Group Federal All States Total
(in 1000s) (in 1000s) (in 1000s)
Mammals $742,828.7 $66,260.5 $809,089.2
Birds 268,388.6 120,233.4 388,622.0
Reptiles 50,794.2 18,139.5 68,933.7
Amphibians 1,257.4 141.8 1,399.2
Fish 222,744.1 5,195.1 227,939.2
Snails 1,322.4 86.1 1,408.5
Mussels 7,533.3 1,145.4 8,678.7
Crustaceans 627.6 78.5 706.1
Insects 11 ,365.6 2,939.6 14,305.2
Arachnids 3,035.7 21.3 3,057.0
Plants 18,014.6 4,142.4 22,157.0
All Groups $1 ,327,912.2 $218,383.6 $1 ,546,296.0
Source: Cash, D., et al. "The Database on the Economics and Management of Endangered Species (DEMES)," Endangered
Species Protecfion In the United States: Biological Needs. Political Realifies. Economic Choices. J. Shogren and J. Tschirhart,
eds. New York: Cambridge University Press, forthcoming 1999.
Three highly publicized examples of interest
group and government conflicts revolve around ef­forts
to protect the northern spotted owl and vari­ous
species of salmon in the Pacific Northwest,
and to reintroduce the timber wolf to Yellowstone
Park. Conflicts such as these cause costly litigation
among business, environmental, and government
groups, including litigation between government
agencies. Some groups see their ability to protect
their investments or their privacy threatened by too
many ESA mandates, while others envision their
natural heritage jeopardized by too few mandates.
Regardless, both groups see the Act as going be­yond
species protection in that the ESA has proven
to be a powerful tool to control land use.
Many landowners affected by the Act fear ced­ing
control of their resources and privacy to state
and federal governments. Although the federal gov­ernment
devotes only a small portion of its budget
to the ESA, the dollars it does spend can over­whelm
local communities set against ESA policies
or stimulate local communities favoring ESA poli­cies.
Table 2 shows spending by federal and state
agencies on endangered species broken down by
taxonomic groups. Because the ESA specifies that
listing is legally required to be based on science,
funds would hopefully be allocated according to
the biological needs of preservation. But evidence
suggests that funding frequently follows interest
group politics and "pork" spending (see, for ex­ample,
Ando).
Economic choices
In the end, questions of listing and habitat protec­tion
come down to tile fundamentals of decision
making-accurately assessing the risks of extinc­tion,
weighing benefits against opportlU1ity costs,
and understanding impediments and incentives for '
voluntary species protection. The need to under­stand
these flU1damental issues has pushed econom­ics,
welcome or not, into the middle of the reau­thorization
debate. Why economic behavior needs
to be better integrated into the ESA still puzzles
many noneconomists who equate economics wiili
financial and commercial concerns. This is unfor­tunate
in iliat we need to stress iliat economics and
conservation biology have ilie same underlying guid­ing
principle-choice under scarcity. And iliat by
better accounting for ilie basics of economic be­havior
in ESA policy formation we can hopefully
reverse the trend that has often led to ineffective
and, in some instances, counterproductive conser­vation
policy. For example, a few days before the
Fish and Wildlife Service listed the golden-cheeked
warbler, a firm owned by Ross Perot hired workers
to destroy hundreds of acres of oak and juniper­habitat
to ilie warbler (Mann and Plummer). Point­ing
out iliat we can save more species wiili fewer
resources once economics is addressed may seem
obvious to economists, but to many people it is
not so clear.
Economic behavior matters to species protec­tion
for at least iliree reasons (Shogren et al.). First,
economic behavior matters because economic cir­cumstances
(for example, relative prices, per capita
wealili) influence the risks faced by a species and
ilius whether a species should be listed as endan­gered.
Most people agree with one side of iliis ar­gument.
The common perception is that people's
quest for development and commercial profits de­stroys
habitat and endangers species-full stop, end
of discussion. But iliis sentiment gives only half of
the stoty. On ilie oilier side, people like nature, a
preference that leads to ilie private creation or pro­tection
of habitat. Relative land prices and wealth
influence private landowners' ability to set aside land
for habitat protection. Risk assessment that does not
account for private citizen and community response
to wealili or relative land prices, as it affects habitat
preservation decisions, will underestinlate risk in some
regions and overestimate risk in oiliers.
This fairly contentious point says that econom­ics
has a bigger role to play than just helping find
cost-effective solutions. We are saying that the bio­logical
sciences cannot ignore economic parameters
in their models of risk-a point not obvious or
acceptable to many people. But it is correct if ~ou
believe that economic and ecological systems are
jointly determined. We are pointing out a problem
of omitted variable bias that exists in the prevailing
risk assessment-risk management bifurcation un­derlying
ESA policy. One can jusrly characterize
the current ESA mindset as following three linear
steps: (1) financial and commercial quests put a
species at risk; (2) biology determines whether a
species should be listed as endangered; and (3) eco­nomics
then can be used to find cost-effective rem­edies
to reverse this trend. We question step 2-
listing decisions based only on biology. The preci­sion
of species risk assessment can thus be increased
by using both biological and economic parameters
as determinates of endangerment. Whether the ex­tra
precision is worth the cost of more information
is an empirical question.
Second, economic behavior matters because scar­city
is a reality. Society may place greater value on
other goods and services created from scarce re­sources
than on the last species these resources might
preserve. Choices between species protection and
other programs must be made. Making good choices
requires that we estimate the benefits and costs of
proposed programs. Even very intangible, difficult­to-
measure values, such as moral imperatives to pro­tect
earth's inhabitants, must be recognized. Policy
makers and regulators already implicirly weigh ben­efits
and costs. Explicirly incorporating more formal
methods to help discriminate between and among
species and other programs will provide greater open­ness
and -u"ansparency in how we choose to rank
listing decisions and implement recovety plans.
What costs and benefits, for instance, arise from
saving the endangered Dehli Sands flower-loving
fly in California? The costs have included $4 mil­lion
to relocate the site of a new hospital in San
Bernardino County. Many people probably would
echo the words of Colton, California, city attorney
Julia Biggs: "I consider myself an environmentalist,
but this is offensive to me. This is not some sylvan
glen .... This is not a lion, tiger or bear. Or even an
owl. This is a fly ." The contrary voice says that the
original hospital site provides critical habitat more
scarce and irreplaceable than other potential areas
of hospital construction. Dragging these disparate
perceptions of costs and benefits into an explicit
benefit-cost framework can shed light on the pros
and cons of alternative options.
If benefits cannot be easily or reasonably esti­mated,
government policy should find the least-
CHOICES Third Quarrer 1999 7
expensive path to a desired target. Three examples
underscore how cost-effective policies can improve
resource allocation. First, policies which recognize
the heterogeneity of land values rather than using
standard homogenous valuations can substantially
cut the cOStS of species protection. A second ex­ample
focuses on diminishing returns. The north­ern
spotted owl can be saved relatively inexpen­sively
with a reasonably high probability. But re­searchers
estimate the cost to improve the odds of
survival to 92 from 91 percent at $3.8 billion (Mont­gomery,
Brown, and Darius). Is the exu'a percentage
worth it? A third example of least-cost programs
follows the old adage that "an OWlce of prevention is
worth a pound of cure." Prevention strategies such
as landscape conservation, the establishment of parks
and reserves, and the enaCU11ent of habitat may prove
more cost-effective than species recovery programs
that protect only one species.
The mird reason why economics matters for en­dangered
species protection is because economic
incentives guide hwnan behavior. Endangered spe­cies
inhabiting private land can be protected if eco­nomic
incentives encourage landowners to preserve
their prope,rty. Currenrly, the ESA provides some
regulatory incentive for landowners to cooperate
with species conservation policy through Habitat
Conservation Plans-plans that allow a landowner
8 CHOICES Third Quarrer 1999
to alter habitat under certain management restric­tions.
But current financial incentives may prod
landowners to prevent government biologists from
looking for listed species on private pro perry, or
to destroy habitat for listed species, or to "take"
listed and potentially listed species. T hese ac­tions
may result in direct harm to listed species
and destruction or reduction in the value of habi­tat,
and they may increase the costs of designat­ing
habitat and species recovery. Agencies or pri­vate
parties can attempt to prevent such actions
by providing incentives for landowners to coop­erate
through compensation for "takings," rather
than creating disincentives through permits or
crimi nal penalties.
Imperfect information confounds the design
of preservation policy. On private land, the gov­ernment
needs landowner cooperation to gain
the information necessary to administer conser­vation
policy. Some landowners can escape regu­lation
altogether by withholding biological in­formation
from government officials. If this is
the case, effective conservation policy may need
to buy information rather than sell fear with per­mits
and fines. But here is the rub . T he agency
should lower the payment to lessen the incentive
for some landowners to take advantage of their
private information, but smaller subsidies result
in fewer acres set aside fo r habitat. On net, the
realized habitat will be less than desired, or the
desired habitat will be more expensive than jus­tified.
Research on the economics of imperfect
information suggests that a combination of
mechanisms might be needed to help society
reach a better level of species protection. Com­pensation,
government or conservation group
purchases of land or development rights, insur­ance
programs, tax breaks, and tradable rights in
habitat conservation might all be needed.
Charting a future course
Twenry-five years ago Congress established the
ESA to address the risk of species extinctio n. And
while a quarter century is a short time to judge
the overall effectiveness of the Act, enough data
and knowledge exist now to suggest how econom- .
ics can help improve the ESA in both listing deci­sions
and recovery plan development. First, the
decision to list a species as endangered can be
improved by accounting for economic circum­stances
in species risk assessment. Human actions
and reactions help determine risk and its conse­quences;
omitting these factors from risk assess­ment
can bias estimates of risk. Second, the ben­efits
and costs of protection should frame the ESA
policy debate. Realiry dictates that the net ben­efits
of preservation be weighed against the net
benefits of other important societal objectives.
Third, the ESA will be more effective by creating
the economic incentives to implement the desired
level of species preservation in a least-cost man­ner.
Economic incentive schemes can and have
worked. Making these schemes more cost-effec­tive
will require additional information on eco­nomic
opportuniry costs and biological effective­ness.
But we also recognize that sometimes com­pensation
is not enough-landowners want their
privacy respected, their prior stewardship efforts
acknowledged, and their abiliry to protect their
investment unrestricted.
This suggests that we should explore the option
in which landowners are provided the opportuniry
to sell private shares of critical habitat rights on the
open market without opening themselves up to pub­lic
access. Similar to the real estate market, private­sector
bioeconomic appraisers would assess the bio­logical
quali ry of the critical habitat rights offered
for sale. Sellers would then post their offer to sell a
given habitat right for a given price, subject to pri­vate
appraisal. Information not essential to the trans­action
would remain confidential. Such a market
could complement already existing programs that
use a bilateral negotiation landowner-by-landowner
approach.
As we begin the next millenium, some scientists
argue that our biological systems could undergo
profound and rapid changes resulting in extinction
of many species. Better let it be said that we were
.. not adrift in a sea of interest groups and political
infighting, but rather that we used the best biologi­cal
and economic lrnowledge we had to chart our
course. rt.I
• For more information
Ando, A "Implications ofInterest-Group Behavior for
the ESA" Endangered Species Protection in the United
States: Biological Needs, Political Realities, Economics
Choices. J. Shogren and J. Tschirhart, eds. New York:
Cambridge University Press, forthcoming 2000.
Bean, M. "Endangered Species? Endangered Act?" En­vironment
41 (1999): 12-38.
Brown, G., and J. Shogren. "Economics of the Endan­gered
Species Act."]. Econ. Perspect. 12(1998):3-20.
Eisner, T., J. Lubchenco, E. Wilson, D. Wilcove, and
M. Bean. "Building a Scientifically Sound Policy for
Protecting Endangered Species." Science
268(1995): 1231-32.
Goldstein, J. "Whose Land Is It Anyway?" Choices,
Second Quarter 1996, pp. 4-8.
Innes, R., S. Polasky, and J. Tschirhart. "Takings,
Compensation and Endangered Species Protection on
Private Lands." ]. Econ. Perspect. 12(1998):35-52.
Mann, c., and M. Plummer. Noah's Choice. New York:
Alfred Knopf, 1995.
Metrick, A, and M. Weitzman. "Patterns of Behavior
in Endangered Species Preservation." Land Econ.
72(1996):1- 16.
Montgomery, c., G. Brown, and M. Darius. "The
Marginal Cost of Species Preservation: The Northern
Spotted Owl. " ]. Environ. Econ. and Manage.
26(1994): 111-28.
National Research Council (NRC). Science and the
EndangeredSpeciesAct. Washington DC: NationaiAcad­emy
Press, 1995.
Polasky, S., and H. Doremus. "When the Truth Hurts:
CHOICES Third Quarter 1999 9
Endangered Species Policy on Private Land with Imper­fect
Information.» ]. Environ. Econ. and Manage.
35(1998):22-47.
Shogren, J ., ed. Private Property and the Endangered
Species Act: Saving Habitat, Protecting Homes. Austin
TX: University of Texas Press, 1998.
Shogren, J.F., J. Tschirhart, T. Anderson, AW. Ando,
S.R. Beissinger, D. Brookshire, G.M. Brown, Jr., D.
Coursey, R. Innes, S.M. Meyer, and S. Polasky. "Why
Economics Matters for Endangered Species Protec­tion."
Conservation Biology, in press.
U.S. Fish and Wildlife Service. Report to Congress:
Endangered and Threatened Species Recovery Program.
U.S. Government printing office, Washington DC,
1994.
Jason Shogren
is the Stroock
Distinguished
Professor of
Natural
Resource
Conservation
and Manage­mentand
professor of
economics, and
John Tschirhart
is professor of
economics and
director of the
Public Utility
Research and
Training
Institute, both at
the University of
Wyoming.